Lord Maclennan of Rogart: On the issue of what has changed, does not the noble Lord agree that the BBC has become subject to trenchant attacks in that period, some of which have suggested that money voted for one purpose was being used for anotherdigitalisation being funded by money intended for programming? Such charges may be totally without foundation, but they are wide and damaging. Would it

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not provide the best possible assurance that they are seen off, as it were, to entrust consideration to that established process?

Lord Sheldon: We have the governors of the BBC, one of whom is present. I want to say something about their role and how I admire the work they have performed over a long period.

The task of examination of the accounts is undertaken by the National Audit Office. The Comptroller and Auditor General is an officer of the House of Commons. It was Sir Gordon Downey who implemented most ably and successfully the setting up of the National Audit Office. The current Comptroller and Auditor General is Sir John Bourn, who succeeded him. I have enormous admiration and respect for Sir John.

Under the 1983 Act, the selection of the Comptroller and Auditor General is made by the chairman of the Public Accounts Committee, with the agreement of the Prime Minister. I considered that to be one of the most important decisions of my parliamentary career. Following my interviewing of 15 candidates, Sir John stood out and I proposed him in a letter to Mrs Thatcher, who moved the appointment in the House of Commons.

Sir John has been an outstanding success. The National Audit Office has effectively been made in his image: efficient, innovative, and the very model of what I believe an institution created by a civil servant should be. But I must consider the problems of a future National Audit Office. How far could it become embroiled in controversy? No one in Whitehall or Westminster is more proud than I of the National Audit Office and of the C & AG. It is much better to leave those matters to the governors of the BBC in the manner that has worked, is working well, and continues to meet the requirements laid down so many years ago.

The question is: how could a future Public Accounts Committee behave in the years to come? How could the House of Commons behave when the PAC report came before it? The floodgates of criticism in the House of Commons could be opened, with much of the press on a bear hunt. That would be an excellent means for the anti-BBC press and others with their own agenda to harass the BBC. That is why I wanted to exclude the BBC. I still do, although I await further details of the proposals of the noble Lord, Lord Sharman.

Baroness Noakes: I am encouraged by what my noble friend Lady Buscombe said about the progress made since Second Reading. I am interested in what the Minister had to say about what she saw as possible ways forward. In the light of that, and because it was very encouraging, I shall keep my remarks brief.

The existing audit arrangements do not go far enough. I cite two reasons. First, they are limited in scope. A financial audit simply considers financial controls and states whether the accounts show a true and fair view, to use the jargon. That is a limited scope when considering public money. The second problem

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is that the reporting is not public. Although the audit report is public, it is written in an especially technical way and is not subject to examination of the detail that lies behind it.

It is important when considering the accountability of public moneyI am glad that we all agree that we are discussing public moneyto consider the scope of examination and the possibility of public reporting. In the light of the recommendation of the noble Lord, Lord Sharman, which was for full and unfettered access to the BBC, how far does the Minister envisage the proposals that may emerge meeting or falling short of that? Full access to consider economy, efficiency and effectiveness on any grounds is important, as is the ability to report publicly on all that.

The noble Lord, Lord Maclennan, explained how the PAC process was not threatening but fair and balanced. In my experience of working with the NAO and with Sir John Bourn in particular, that, too is a balanced and fair process. NAO reports give praise where praise is due and have a good track record of finding value in improvements to the organisations they examinea value that far outweighs the cost of the audit process itself. Sir John Bourn and his National Audit Office have a good track record of sensitive handling of difficult areas. They know perfectly well how to avoid policy areas and many of the other difficulties that have been discussed.

As I said, I am very encouraged, but I should like more detail.

1.15 p.m.

Lord Brooke of Sutton Mandeville: To be other than brief at this juncture would be self-indulgent. I have never got as far as the Scottish judge who said that the phrase, "A change for the better", was a contradiction in terms, but I have sympathy for the BBC, especially after so long in a different condition.

That said, I recall speaking in the previous Parliament in another place in support of Mr David Davis in his efforts to secure the right to have access to audit the Housing Corporation. The noble Lord, Lord Lipsey, laid out the issue of public money against the background of the article in the Guardian. I remember, during the passage of the National Lottery etc. Act 1993, it being explained to me that when a punter goes into a newsagent and spends a pound buying a lottery ticket, by some process of alchemy and metaphysics, as the money crosses the counter, it becomes public money and is therefore subject to all the full constraints of the law. I am not sure that the punter thought of it in that way, but if that is so, patently, the licence fee falls into the same category.

I welcome what my noble friend Lady Buscombe said in her opening speech; I also welcome what the Minister said in reply. I further sense that if we can reach a genuine concordat with the BBC, that will be in the best traditions of the BBC's evolution.

Baroness Jay of Paddington: I promise the Committee that I shall be extremely brief, but it is worth picking up in general terms one point that the

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noble Lord, Lord Brooke, made about the Housing Corporation. In the same speech by Mr Gavyn Davies to which the noble Baroness, Lady Buscombe, referred in moving the amendment, he said later that, while accepting in principle the idea of further consideration of the audit of the BBC:

"The BBC is a creative, risk-taking institution . . . We must beware of fostering an excessively risk-averse culture, for fear of subsequent public castigation. This would be fatal to the central purpose of the BBC, which is to take creative risk".

So there is a difference between the Housing Corporation, for example, and the BBC in that respect.

Like other Members of the Committee, I am happy that there has been some breaking of the log-jam, if I may put it that way, through the exchange of correspondence between the honourable gentleman, Mr Leigh, and the noble Lord, Lord Sharman. I am grateful to my noble friend the Minister for her early and positive response to that.

Lord McNally: I shall be very brief. Over my years in politics, I have decided that if going into deep water it is best to go with someone who can swim, which is why I asked my noble friend Lord Sharman to consider the issue. The dilemma that faces the House is best exemplified by the speeches of the two veterans of the Public Accounts Committee, both with enormous experience and commanding great respect in the House, who have come to different conclusions. That is why I asked my noble friend Lord Sharman to consider the matter.

I shall break the rule of the noble Lord, Lord Lipsey, and remind the Committee of something I said on Second Reading. The genius of the BBC was that cordon sanitaire set up 80 years ago between the politicians and the working of the BBC by the governors. Any Parliament considering the BBC for the 21st century would be reckless to disturb that cordon sanitaire. However, the strictures of the noble Lord, Lord Lipsey, my noble friend Lord Maclennan and others must be taken to heart. Things have changed in the past 20 years.

I welcome the flexible approach taken by the noble Baroness, Lady Buscombe, in moving the amendment and the Minister's response. There is scope for a compromise here and I look forward to hearing the results of further consultation on Report.

Baroness Hogg: I declare an interest as a governor of the BBC. In that capacity, I wish to say how much I benefited from listening to the contributions to the brief debate on this issue, and how greatly I appreciate the sensitivity on all sides of the Committee to preserving the independence of the BBC. I know that that has been borne strongly in mind in discussions, although obviously I am not party to them. As a governor whose duty is to preserve the independence of the BBC, I appreciate the importance of the issue.

Lord Lipsey: At the risk of enraging the Minister, who wishes to get on, perhaps I may detain the

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Committee for one more minute. It will save time later if I do. I welcome the words just uttered by the noble Baroness, Lady Hogg. To get where we are, there had to be tremendous flexibility on behalf of the BBC and, to be fair, the Comptroller and Auditor General and the chairman of the Public Accounts Committeelet us not forget that they have their needs. If we achieve the deal as outlined by the noble Baroness, it will be an experiment, which means giving up quite heavily felt PAC doctrine. The committee is to be highly commended for its flexible approach.

For the agreement to crystallise, three points must be made clear. First, the compromise of the noble Lord, Lord Sharman, which many will have seen, makes clear that the subjects to be investigated by the NAO on behalf of the BBCthe BBC may investigate others itselfshould be done through dialogue with the BBC. I feel sure that that dialogue would be productive. The BBC could help by making very clear that it would not unreasonably withhold its consent to a subject proposed by the Comptroller and Auditor General. I am sure that that would be true, because if it withheld consent unreasonably, there would be big trouble.

The second point is that the noble Lord, Lord Sharman, makes clear that the report of the audit committee is made to Parliament. I take it as axiomatic that it is a matter for Parliament to decide which committee the report is made to. I also believe that the Public Accounts Committee would be chosen. I accept entirely that further reassurance of the BBC may be needed on the point about the accounting officer, which, as we agreed, is critical.